Stocks Lower into Afternoon on Brexit Deal Worries, Global Growth Concerns, Profit-Taking, Tech/Defense Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.3 +3.5%

• Euro/Yen Carry Return Index 125.69 +.16%

• Emerging Markets Currency Volatility(VXY) 7.76 -.89%

• S&P 500 Implied Correlation 33.65 -.03%

• ISE Sentiment Index 75.0 +34.1%
  

• Total Put/Call .96 +6.67%

• NYSE Arms .93 -13.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.50 -.58%
  

• America Energy Sector High-Yield CDS Index 486.0 +1.06%

• European Financial Sector CDS Index 59.97 -1.7%

• Italian/German 10Y Yld Spread 130.75 +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 70.71 -1.6%
  

• Emerging Market CDS Index 201.17 -.29%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.69 +.01%

• 2-Year Swap Spread 4.75 +.25 basis point

• TED Spread 30.5 -4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.25 -2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.04 +.42%
• 3-Month T-Bill Yield 1.66% unch.

• Yield Curve .17+1.0 basis point

• China Iron Ore Spot 82.69 USD/Metric Tonne +.18%

• Citi US Economic Surprise Index 8.0 -.2 point

• Citi Eurozone Economic Surprise Index -67.0 +1.8 points

• Citi Emerging Markets Economic Surprise Index -19.60 unch.

• 10-Year TIPS Spread 1.60 +2.0 basis points
• 91.3% chance of Fed rate cut at Dec. 11th meeting, 94.0% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +37 open in Japan 
• China A50 Futures: Indicating -9 open in China

• DAX Futures: Indicating +12 open in Germany

Portfolio:

• Slightly Lower: On losses in my industrial/tech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.1%

Sector Underperformers:

• 1) Internet -1.9% 2) Defense -1.8% 3) Software -1.8%

Stocks Falling on Unusual Volume: 

• HBI, WDAY, GPS, JNJ, NOW, TW, IBKC, TRHC, NFLX, PETQ, RNG, ZEN, SMAR, ZS, MDB, OKTA, LB, EXPO, COUP, AYX, ROKU, SXT, WORK and MRTX

Stocks With Unusual Put Option Activity:

• 1) CAH 2) TLRD 3) CAR 4) BMY 5) BRK/B

Stocks With Most Negative News Mentions:

• 1) SXT 2) LB 3) JNJ 4) MU 5) VRAY

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value unch.

Sector Outperformers:

• 1) Banks +1.0% 2) Restaurants +.5% 3) Gaming +.5%

Stocks Rising on Unusual Volume:

• HEP, KSU, ISRG, ETFC, STT, PBCT, GNTX, WAL, MNTA, UBNK and CCK

Stocks With Unusual Call Option Activity:

• 1) CZR 2) EWU 3) ISRG 4) AXP 5) APA

Stocks With Most Positive News Mentions:

• 1) ISRG 2) ETFC 3) KSU 4) GNTX 5) KO

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -.1% Below 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 49.1% of Issues Advancing, 46.9% Declining
• 112 New 52-Week Highs, 25 New Lows
• 54.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.7%
• Vix 14.3 +3.6%
• Total Put/Call 1.09 +21.1%
• TRIN/Arms .91 -15.0%

Friday Watch

Evening Headlines

Bloomberg:       

• Two Crisis Phone Calls Unlocked the ‘Impossible’ Brexit Deal.     

• China Convertible Bond Market Shows Signs of Roaring to Life.

• Japan’s Cabinet Approves Tougher Rules on Foreigners Owning Stocks. 

• RBA Watchers Mull Aussie QE That Could Spur Property-Price Gains.

• Congress Pushes Forward On Turkey Sanctions Despite Ceasefire.

• White House, Democrats Upbeat on USMCA Despite Impeachment. 

• Asia Stocks See a Mixed Open Ahead of China Data. Asian stocks headed for their highest close since July on Friday after U.S. shares edged closer to a record. The dollar traded near its weakest since before August’s trade-war turmoil amid diminishing demand for havens. The yuan was little changed before key economic data from China on Friday, though the indicators -- including third-quarter GDP -- may have limited significance as investors look to a potential U.S.-China trade deal between Presidents Donald Trump and Xi Jinping next month. Stocks in Tokyo and Seoul rose Friday, while Australia’s benchmark dipped. Treasuries were little changed. Futures on the S&P 500 were flat as of 9:23 a.m. in Tokyo. The underlying gauge rose 0.3% on Thursday. Japan’s Topix advanced 0.5%. Hang Seng futures earlier ended flat. Australia’s S&P/ASX 200 Index dipped 0.2%. Kospi Index gained 0.3%.

• Five Things You Need to Know to Start Your Day.

Wall Street Journal:

• Turkey Agrees to Pause Military Operations in Syria.

• Fred Smith Created FedEx. Now He Has to Reinvent It.

• Why Your Next Louis Vuitton Bag May Hail From Texas.

• AT&T in Talks to Resolve Elliott Management’s Activist Campaign.

• U.K., EU Reach Draft Brexit Deal, Paving Way for Vote.

• Medicare for All Loses Support Amid Lack of Detail on Costs to Voters.

• Juul Halts Online Sales of Some Flavored E-Cigarettes.

• Saudi Aramco Delays Launch of World’s Largest IPO.

Fox News:

• EXCLUSIVE: Zuckerberg rejects Harris' call to shut down Trump's social media.

• US Marine wounded after jumping on grenade has message for Americans.

MarketWatch.com:     

• The No. 1 highest paid, most in-demand job in every U.S. state.  

• What a Brexit deal would mean for U.S. stocks and global investors.

CNBC:

• WeWork could run out of cash by mid-November — here’s what would happen next.

• GM workers will remain on strike while voting on UAW’s four-year contract proposal.

• Jim Cramer says stock market will ‘blast’ past current levels if trade questions are resolved.

• ‘These not-as-bad-as-feared quarters are good news for shareholders,’ Jim Cramer says.

• Elizabeth Warren did not win the debate and now she’s got work to do.

• Stocks making the biggest moves after hours: E-Trade, AT&T, Intuitive Surgical & more.

Zero Hedge:

• Visualizing Bernie Sanders' Proposed Tax Reform.

• NBA Fan Raises $43K For "Stand With Hong Kong" T-Shirts As Protesters Torch LeBron Jerseys.

• China Secretly Ordered NBA Commissioner To Fire Rockets' GM Over Hong Kong Tweet.

• The FBI Wants Your Info...And They're Getting It!

• Despite Widespread Censorship, Zuck Claims "Not Comfortable Being Arbiter Of Free Speech".

• Schwab Will Soon Allow Investors To Buy And Sell Fractions Of Stocks.

• The US Healthcare System Is Hemorrhaging Close To $1 Trillion A Year.

• "Credibility At Stake": Maduro's Venezuela Given Seat On UN Human Rights Council.

• Brexit-Bounce Fades As Short-Interest-Slump Signals Crash Concerns.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 71.5 -1.0 basis point.

• China Sovereign CDS 41.0 -2.0 basis points.

• Bloomberg Emerging Markets Currency Index  65.80 +.04%.

• FTSE 100 futures -.24%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures -.09%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (AXP)/2.02

• (KO)/.56

• (GNTX)/.42

• (KSU)/1.79

• (MAN)/1.94

• (NVR)/51.52

• (SLB)/.40

• (STT)/1.40

After the Close:

• None of note

Economic Releases
10:00 am EST

• The Leading Index for Sept. is estimated unch. versus unch. in Aug.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China GDP report, California Canabis Policy Summit, (SLB) investor roundtable and the (SCHW) business update could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Rising into Final Hour on Brexit Deal Optimism, Earnings Outlooks, Oil Gain, Retail/Healthcare Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.8 +.58%

• Euro/Yen Carry Return Index 125.50 +.38%

• Emerging Markets Currency Volatility(VXY) 7.86 -.76%

• S&P 500 Implied Correlation 33.40 +2.33%

• ISE Sentiment Index 56.0 -52.1%
  

• Total Put/Call .94 +1.08%

• NYSE Arms 1.03 -13.45%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.79 -.55%
  

• America Energy Sector High-Yield CDS Index 482.0 -.31%

• European Financial Sector CDS Index 61.0 +4.19%

• Italian/German 10Y Yld Spread 129.75 -1.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 71.79 -1.43%
  

• Emerging Market CDS Index 201.75 -1.28%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.68 +.06%

• 2-Year Swap Spread 4.5 +.25 basis point

• TED Spread 34.75 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 -3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.76 +.37%
• 3-Month T-Bill Yield 1.66% unch.

• Yield Curve .16 unch.

• China Iron Ore Spot 82.65 USD/Metric Tonne -.19%

• Citi US Economic Surprise Index 8.20 -5.4 points

• Citi Eurozone Economic Surprise Index -68.8 +1.5 points

• Citi Emerging Markets Economic Surprise Index -19.60 +.2 point

• 10-Year TIPS Spread 1.58 +1.0 basis point
• 87.8% chance of Fed rate cut at Dec. 11th meeting, 91.7% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +102 open in Japan 
• China A50 Futures: Indicating +29 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio:

• Higher: On gains in my retail/industrial/biotech/medical sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long